Essendon Fields in fight with government over land tax

Trucking magnate Lindsay Fox and property veteran Max Beck have been underpaying land tax at Essendon Airport, a site they lease from the federal government in Melbourne, court documents allege.

The family of Mr Fox and Mr Beck have been developing the Essendon Fields business park around Melbourne's second airport since 2001 after paying $22 million for a 50-year lease in 1998.

The once moribund airport land, 11 kilometres from the Melbourne CBD, now has more than 300,000 square metres of leased commercial property and 60,000sq m of office space, including a newly completed Hyatt Place business hotel.

The increased value of the land and its multiple different uses has led to a dispute over the terms of the lease with the federal government.

Documents lodged in the Federal Court allege the airport's operators misinterpreted their lease and incorrectly underpaid "ex gratia" land tax.

Federal government property is exempt from state-imposed land taxes under Commonwealth law.

But the government maintains the lease covering Essendon Airport requires the operators to make payments in lieu of land tax for areas subleased to businesses, shopping centres and other operators.

The site has a LaManna supermarket, a large DFO outlet, offices, car dealerships and warehouses subleased to multiple businesses.

Land tax does not apply to the airport's runways, taxiways, aprons, buffer zones and grass verges.

The payments should have been calculated on the combined value of all the developed parts of the airport that Essendon Fields subleases, the court documents state.

Instead, since 2007, Mr Fox and Mr Beck's company has applied separate tax-free thresholds and marginal rates for different areas of the airport rather than the combined value of all land.

They also excluded carparks and deducted costs for reconstructing aeronautical infrastructure that had already been built by the Commonwealth, the government's solicitors said.

"As a result, the Commonwealth considers that ... [the airport] has been underpaying ... since at least the 2006/2007 financial year and disputes the payments made."

Essendon Fields has paid $2,014,693 in land tax over an 11-year period since 2007.

Its incorrect interpretation of the lease resulted in a significant drop in value - from $92 million to $3.5 million - between 2015 and 2016 and a corresponding slump in land tax paid, the documents state.

Essendon Fields chief executive Chris Cowan said the correct amount had been paid under the lease terms.